eBooks Are Killing Publishers, and Other Post Facto Nonsense

One common theme the mainstream press uses when it covers digital publishing is the demise of ebooks and revival of print. Now The Independent is turning that on its head, and proclaiming that the rise of ebooks is killing off publishers.

In the year to 30 June, 128 publishers in the UK went out of business, according to the accountancy firm Moore Stephens. The prior year there were 81 insolvencies. A rise in popularity of e-readers such as the Kindle has fuelled the increase, said Moore Stephens.

The firm added that smaller publishers that have been slow to adapt and make their products available as e-books have seen sales fall. Parts of the industry that have typically enjoyed higher margins, such as academic publishing, have also endured a tougher sales market. Meanwhile smaller companies are feeling the strain of having to offer discounts to compete with larger online rivals.

David Elliott, restructuring and insolvency partner at Moore Stephens, said: “The fall in the value of sales for physical books is larger than the growth of e-books, and this is a worrying trend for publishers that are still dependent on paper for their profits.”

Digital continues to grow, with UK e-book revenues climbing 11 per cent to £563m in 2014. But data from the Publishers’ Association shows sales of physical books fell 5 per cent to £2.7bn.

As an ebook fan, I'd love to proclaim this as good news, but the lack of evidence, or in fact any causal relationship, has stopped me from joining the parade. (And then there's the bad/incomplete industry sales data, which in no way represents the whole of the UK book market.)

Sure, digital is creatively disrupting the publishing industry, but you can't attribute every failed publishing venture to ebooks; that is too simplistic of a conclusion, and in many cases it is simply false.

And that goes double when you consider what Moore Stephens hasn't told us, including the segment of publishing industry the now-deceased publishers were part of. Did they operate in one of the segments where ebooks are disrupting the business model (trade fiction, mainly) or one of the segments where ebooks had less impact?

In trade non-fiction, for example, the internet with its many sources of useful info is arguably having as much of an impact as ebooks; at least with the latter publishers have a chance of making sales, but websites are replacing print advertising dollars with mobile pennies.

And then there are textbooks, where publishers are pricing themselves out of the market and have to contend with free OER alternatives.

All in all, this story has less substance than a Nickelback song, and I'm not the only one to think so. Baldur Bjarnason commented on this nubbin of a story earlier today, and he points out that trade publishing has 99 problems, only one of which is ebooks:

Consumer customers (the worst/least predictable kind of customer).

Entertainment good (the worst/least predictable kind of product).

A market that’s shifting increasingly to the blockbuster model (the worst/least predictable kind of market).

Dominated by vendor duopolies (Amazon and B&N in the states, Amazon and Waterstones in the UK).

Staff that on average has little training or experience (the combination of low pay and expensive location results in experienced staff burning out or leaving for greener pastures).

He argues that instead of asking why a trade publisher fails, we should ask this:

How in hell have existing trade publishers survived?

To answer his question, my current working theory is that most major publishers are money-laundering operations for organized crime.

But a slightly more plausible explanation is that they can't survive - which is why some governments continue to prop up the industry with either handouts, tax incentives, or price control laws (France, Germany, Australia, etc).

In any case, trade publishing has about the life expectancy of a moa, and yet it is still around. The real wonder today shouldn't be that ebooks killed off a few publishers, but that the industry hasn't imploded in an Enron-level disaster.

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Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

Parts of the industry that have typically enjoyed higher margins, such as academic publishing, have also endured a tougher sales market.

What are higher margins to some people are outrageous prices to others. Not a big surprise that a niche with high margins, a.k.a. outrageous prices, might be affected by a more economical method of publishing.

he points out that trade publishing has 99 problems…..Extremely expensive locations (London and New York). My uncle spent over a decade as vice president of a division of a New-York based publishing firm. In the 1980s, his division was considering moving out of New York to save costs- and it eventually did. Too bad about all those martini lunches at those posh restaurants that the expense account paid for.

If publishers were really working for organised crime, they would have more incentive to behave rationally, not less. Laundering money and throwing it away are two different things.

The sad fact is that publishers still operate in a market where the supply of raw material is overwhelmingly large and cheap and the demand for output is extremely low by comparison. They can turn away 990 out of every thousand authors, and abuse the remaining ten, because they know that there will be another thousand queuing up for the same treatment next year. Only when this ends will they have a genuine incentive to act on behalf of their suppliers rather than themselves.

I mean I don’t even know if you come at any of this from a historical point of view, but it doesn’t seem like it.

‘But a slightly more plausible explanation is that they can’t survive – which is why some governments continue to prop up the industry with either handouts, tax incentives, or price control laws (France, Germany, Australia, etc).’

Part of this is territorial copyright. If you opened up Australia so that booksellers could buy cheap books from international players, you could kiss homegrown books mostly goodbye, and certainly not in numbers that would make Australian writing flourish. Independent bookstores would suffer enormously as mega stores would just use their resources to undercut the prices by a ridiculous amount. Did you know the split of sales in Australia is a third between indies, chain stores and department stores?

And while Baldur makes good points, the reason it has survived is the nebulous term culture, which is so often overlooked in all this discussion. His point about being the next PRH is…no duh? It’s a tough business, but it’s an important one.

Me personally once I start writing it will be the self-pub route, and I have started a small digital/POD sci fi imprint, exactly as Baldur says. But trad pubs aren’t nearly so bad or evil as is constantly made out, especially at The Passive Voice.

Dude, have you heard of Deep Discount clauses? Non-compete clauses? Harlequin self-dealing lawsuit? The evidence in the DOJ emails? Their *culture* of collusion. None of it has anything to do with copyright or being jaded; merely informed. Yeah, there’s some honest publishers out there. But they’re not to be found among the BPHs, who are among the most predatory of businesses still active. Comparing them to organized crime isn’t as much of a reach as might appear. The mob might have omerta but the NYC publishing establishment has “you’ll never work in this town again”. Not. Good. People.

Price control laws are not there to help publishers but to protect (small) bookstores who cannot afford to discount aggressively like big b&m and online stores and do not have their negotating power and who would otherwise be squeezed out of the market (I’m not judging, just saying that this is the purpose of such laws). Price control laws or not, publishers are still free to set prices as they please, but price control laws means all retailers must offer books at the price set by the publisher (although there are usually a few exceptions; e.g., in France, consumers can get a 5 % discount and libraries and the like are entitled to a 9 % discount – at least for physical books).

By the way, this has nothing to do with “territorial copyright” or the protection of “homegrown” books: In France for instance (sorry, but that’s where I live), imported books are subject to the same restrictions as French-published books (i.e., no more than a 5 % discount to consumers) but the importer is still free to set whatever price they please so price control laws are not going to stop him from setting a lower price if they want.